What I’m Watching This Week – 12 June 2017

The Markets (as of market close June 9, 2017)

The benchmark indexes listed here produced mixed results last week. The large-cap Dow gained a little more than 0.25%, while the small-cap Russell 2000 jumped over 1.0% by last week’s end. On the other hand, tech stocks took a hit as the Nasdaq fell over 1.5%. Long-term bond prices fell last week as evidenced by the 4-basis-point jump in the yield of 10-year Treasuries. It’s hard to tell what impact, if any, the domestic (Comey testimony) and foreign (UK election) political developments may have had on the market.

The price of crude oil (WTI) fell back last week, closing at $45.90 per barrel, down from the prior week’s closing price of $47.74 per barrel. The price of gold (COMEX) decreased last week, closing at $1,268.80 by late Friday afternoon, down from the prior week’s price of $1,281.50. The national average retail regular gasoline price increased to $2.414 per gallon on June 5, 2017, $0.008 higher than the prior week’s price and $0.033 more than a year ago.

Market/Index 2016 Close Prior Week As of 6/9 Weekly Change YTD Change
DJIA 19762.60 21206.29 21271.97 0.31% 7.64%
Nasdaq 5383.12 6305.80 6207.92 -1.55% 15.32%
S&P 500 2238.83 2439.07 2431.77 -0.30% 8.62%
Russell 2000 1357.13 1405.39 1421.71 1.16% 4.76%
Global Dow 2528.21 2790.26 2782.75 -0.27% 10.07%
Fed. Funds target rate 0.50%-0.75% 0.75%-1.00% 0.75%-1.00% 0 bps 25 bps
10-year Treasuries 2.44% 2.16% 2.20% 4 bps -24 bps

Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.

Last Week’s Headlines

  • Activity has slowed in the non-manufacturing sector in May, according to the Institute for Supply Management. The Non-Manufacturing Index registered 56.9%, which is 0.6 percentage point lower than the April reading of 57.5%. The non-manufacturing sector, which includes such industries as real estate, accommodations, food, arts and entertainment, and health care, grew for the 89th consecutive month (a reading of 50% or higher indicates growth), but at a slower pace than the prior month. According to the Non-Manufacturing ISM® Report On Business®, new orders, business activity, and prices all showed a slower rate of growth compared to April. Only employment grew at a faster pace.
  • According to the Job Openings and Labor Turnover (JOLTS) report, there were 6.0 million job openings in April. Job openings increased in a number of industries, with the largest increase occurring in accommodation and food services (+118,000). Job openings decreased in durable goods manufacturing (-30,000). The number of job openings increased in the Midwest and Northeast regions. The number of job hires decreased by 253,000 to 5.1 million. Hires decreased in health care and social assistance (-68,000) and real estate and rental and leasing (-23,000). The number of hires decreased in the West region. Total separations (turnover) edged down 225,000 to 5.0 million in April. Total separations increased in state and local government education (+17,000) but decreased in retail trade (-100,000). Over the 12 months ended in April, hires totaled 62.9 million and separations totaled 60.7 million, yielding a net employment gain of 2.2 million.
  • Following last week’s election, the UK’s ruling Conservative Party lost its parliamentary majority. How this development will impact the Brexit remains to be seen, but indications are that negotiations will push ahead even though the political strength of Prime Minister May has been weakened.
  • In the week ended June 3, the advance figure for seasonally adjusted initial claims for unemployment insurance was 245,000, a decrease of 10,000 from the previous week’s revised level. The advance seasonally adjusted insured unemployment rate remained at 1.4% for the eighth consecutive week. For the week ended May 27, there were 1,917,000 receiving unemployment benefits, a decrease of 2,000 from the previous week’s level, which was revised up 4,000.

Eye on the Week Ahead

The big news this week surrounds the FOMC meeting and whether interest rates will be increased. The Committee held off on an interest rate hike in May and appeared primed to jack up rates in June. However, major economic indicators, such as consumer prices, consumer spending, the GDP, and the employment sector, have not been especially strong, leading to speculation that at least some members of the Committee may be inclined to hold rates as is until steadier economic progress is evident.